During FY 1999, the Commission witnessed
dramatic changes in the futures and option markets. The evolution of
financial instruments, the growth of international markets, and the
advance of technology all continued to affect the regulatory environment.
The challenge to the Commission is to ensure that its regulatory
structure responds to and accommodates these changes while fulfilling its
mission to protect the price discovery function, prevent manipulation of
commodities through corners, squeezes and similar schemes, and assure an
effective vehicle for risk transference. The agency must also provide
customers with suitable protection from abusive trade practices and
fraud.

The Commission made several definitive
shifts in its regulatory scheme during FY 1999. In recognition of the
changing nature of the industry and increasing competition, the
Commission reformed the process by which new contract markets are
designated and amendments to the terms and conditions of these contracts
are reviewed. The reevaluation of the designation process will continue
in FY 2000. The Commission also proposed significant revisions to the
rules governing the market for over-the-counter agricultural trade
options, which came to fruition in FY 2000.

In response to the increasingly
international nature of the markets, the Commission lifted the moratorium
on placement of trading terminals in the United States by foreign
exchanges. In addition, the Commission published proposed rules that
would clarify when members of a foreign board of trade must register with
the Commission. The Commission also amended rules governing registration,
exemption, and disclosure by registrants trading foreign futures and
option contracts on behalf of U.S. customers and pool
participants.

The Commission prepared for the Year 2000
transition by providing further guidance to the industry, working with
the exchanges and industry associations, and ensuring that the
agency's physical plant and systems will continue to operate in the
new year. The Commission continued to evaluate and respond to the impact
of technology on the industry, and in FY 1999, amended its recordkeeping
requirements to allow records to be kept in electronic storage media and
proposed a rule to allow electronic signatures in lieu of written
signatures by customers.

Throughout the year, the Commission brought
administrative and injunctive actions to enforce the Commodity Exchange
Act and the Commission's regulations. Many of these cases affected
customers on a national and international scale. The Commission and CFTC
staff, as always, provided diligent and committed effort on behalf of the
agency's mission. It is with pleasure that I submit this Annual
Report of the Commodity Futures Trading Commission to the U.S.
Congress.